ROI simply stated is the arithmetic quotient of the benefit you expect to receive from a project divided by the investment in the project. The benefit is the numerator and the investment is the denominator. To improve the ROI quotient, find ways to increase the numerator and/or decrease the denominator.
Based on my experience, these are the ways that an organization implementing and maintaining an ERP system can improve the ROI on their ERP investment
- Choose wisely. Decide exactly what you want the system to do and communicate this with system experts to help you discover how an ERP system can provide benefits for you. If you can’t identify and quantify real benefits, stop right now and invest somewhere else. Be committed to this. Do the work. Do not start by cutting and pasting bits and pieces from RFP’s you find on the Web. Oh, please don’t do that. Benefits ↑ Investment ↓
- Commit to a thoughtfully designed implementation plan utilizing system experts. This will increase your investment but increase the benefits as well; far greater than 1/1. Benefits ↑ Investment ↑
- Be actively involved in the implementation project. Do some of the heavy lifting. This greatly increases your knowledge of the new system, reduces implementation costs, and strengthens your commitment to the project’s success. Benefits ↑ Investment ↓
- If practical, implement the new ERP system in phases. Don’t jump all at once from QuickBooks into a fully integrated manufacturing system with demand planning and MRP. Investment ↓
- License the ERP system on a subscription basis and host it in the cloud. Investment ↓
- Invest and reinvest in user training. An ERP system is a business tool used by humans. If the humans don’t know how to use the tool, there will be no benefit. Benefits ↑ Investment ↑
- After implementation, find ways to extend the ERP functionality and information into other parts of your business, and to other users. Benefits ↑
- Keep you system up to date with new version upgrades. Benefits ↑
- Expand the functionality of your system in ways that continue to provide benefits that exceed the related investment. The quotient for each added bit of functionality must be greater than 1/1. Benefits ↑ Investment ↑
An ERP system has no intrinsic value. It is a business tool. It is designed to provide benefits. Investing in an ERP system is just one of many investments you can make. Do your homework, make a decision, and commit to it.